PETALING JAYA: A consumer boycott of products may not affect the economy but there can be long-term impact on businesses that are targeted, according to experts.
At the same time, it can also be a boon for competitors of the affected companies.
Economics professor Niaz Asadullah of Monash University Malaysia said that for the targeted companies, there would be economic costs to pay while his counterpart at the Malaysia University of Science and Technology, Geoffrey Williams said the damage on a business could take years to repair.
However, such impacts will only be felt if the boycott is maintained for the long term.
Many Malaysians have jumped on the boycott-products-and-companies-associated-with-Israel bandwagon since the start of the Gaza conflict that was sparked off by a Hamas strike on Israel on Oct 7.
The Israeli response to the Hamas attack has left more than 15,000 dead so far, including more than 6,000 women and over 4,000 children.
The boycott, as Asadullah pointed out, is global rather than Malaysia-specific, making a local economy-wide impact unlikely.
“Also, it will affect only specific brands rather than all western brands,” he said.
He said boycotts do no have a significant impact on the overall aggregate demand in Malaysia.
“Instead, they present an opportunity for local competitors to profit from the diverted consumer demand,” he added.
He said a boycott could lead to a shift in demand from imported products to local alternatives that are of a comparable quality.
Asadullah said that to neutralise the impact, some brands may temporarily reduce prices or offer discounts to regain consumer interest.
On the other hand, he said, if the boycott endures companies may be forced to align their values to meet local expectations.
“Historically, organisers of boycotts have also successfully changed a company’s policy and even influenced the government into changing its policies. This is achieved through pressure applied by the consumer,” he added.
Asadullah said extended boycotts can reduce consumer demand, and this can have an adverse impact on the affected businesses and their workers.
Williams said the primary victims of a boycott in Malaysia would be the franchisees and their stakeholders, including employees.
“It will not affect (foreign) investors given that they either do not care about boycotts or are likely to support them,” he said.
He said that if a boycott does not last, job losses will be minimal. Hence, even the targeted companies would be unlikely to change their policies.
“Even if some employees lose their jobs, they will find work elsewhere, resulting in neutral net loss,” he added.
However, Williams said, there are long-term effects of a sustained consumer boycott on a company or industry.
It can force companies to change their policies to avoid losing their business, he added.
“In some cases, the damage to the brand can take many years to repair. Otherwise, companies may be forced to rebrand altogether. Some may even close down,” he said.
Williams said boycotts are primarily driven by concerns related to policies and politics rather than aimed at influencing prices.
“The objective is not usually centred around inflicting economic costs, unless the targeted companies are guilty of profiteering,” he added.